Their view, they noted, is supported by the average price target analysts have on the stock, which is approximately $32. Data from Thomson One shows that out of the 14 analysts that cover Oshkosh, 8 have a “buy” or “strong buy” for the stock, with a mean price target of $32.91 and a median of $34.

That valuation excludes a change of control premium, which Bank of America estimates should be between 20% and 30% over their estimate. That would take their sum of the parts valuation to between $42 to $49 per share. “While we believe that it would be very hard to get a bidder without significant synergies at levels greater than $42/share, the current offer of $32.50 while representing a 21% premium to closing price on October 11, 2012 [sic] seems indeed too low,” they added.

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2 Responses

The move struck me as a typical Icahn formula that he did in Clorox and CVR Energy:
1) put target in play with an offer that appears to create a price floor.
2) wait and see if other financial or strategic buyers step in with a higher bid to create more value and a liquidity event for all shareholders.
3) if step 2 fails, offer to take target private himself, provide value and liquidity to other shareholders and earn a bit more by way of a merger into one of his own entities, breaking it up himself or a combination thereof.

Research in the past has documented an Icahn price jump pre/post announcement but I wonder if one can systematically and profitably exploit the spreads on these sorts of deals and maintain a positive expected value.

Nicely summarized. It’s an ingenious strategy developed by Icahn. Find undervaluation, and supply your own catalyst. Get taken out for a quick bump, or, after demonstrating the absence of potential competing bidders, take it private cheaply.

I’ve never seen research specific to Icahn, but there’s research on the returns to post-13D filing (abnormal and positive), and also also on 13F cloning (depending on the manager, also abnormal and positive).